Software pricing is beginning to feel like Clash of Clans and Candy Crush
It feels like more and more software is free to start but requires consistent in-app payments to actually use.
Usage-based pricing for enterprise software became popular with Snowflake. You use the Snowflake then you get a bill at the end of the month. If that bill is way too big, then you call your Snowflake rep and negotiate discounted credits, provided you commit to some usage level (i.e. 10,000 credits in a year).
When it comes to software using AI models (e.g. LLM’s or diffusion models), you can usually start free, then you hit a (usually super low) cap.
All of these models exist today:
Free up to a cap then pay to reset the cap
Free up to a cap then pay-as-you-go
Free up to a cap then pay for subscription
Subscription all-you-can-use
Subscription for higher cap then pay as you go if you exceed that cap
Some AI software doesn’t have a cap and you just pay-as-you-go from the beginning.
Another interesting decision-point is built-in AI vs bring your own API key.
If a software prompts the user to input their OpenAI/Anthropic API key to use the AI features, the software isn’t making any money from AI usage. The customer is racking up a bill against an API that they’re paying OpenAI/Anthropic directly for.
In the future, maybe we’ll see model providers, like OpenAI and Anthropic, pay a commission to software companies where the user inputs their key. This would make sense for the model providers because these software applications are driving usage.